Making Automobile and Housing Decisions:  Auto Buying Chapter 5
Replace the junker ...
First major purchase
Needs versus Wants
Fit car into your annual budget <ul><li>Salary $35,220 </li></ul><ul><li>Taxes   10,000 </li></ul><ul><li>Rent   6,500 </l...
Find maximum price <ul><li>Budgeted amount $6,800 </li></ul><ul><li>Insurance   400 </li></ul><ul><li>Operating costs   1,...
What Can You Afford? <ul><li>Payment:  $5,400/12 = $450 </li></ul><ul><li>4 years x 12 mo. = 48 </li></ul><ul><li>6%/12 mo...
Choices? 2008 Honda Civic -- $15,210 2008 Honda Element -- $18,750
What Can You Afford? <ul><li>Payment:  $5,400/12 = $450 </li></ul><ul><li>6 years x 12 mo. = 72 </li></ul><ul><li>6%/12 mo...
Other Choices 2008 Mazda Miata -- $25,030 Chevrolet Malibu Hybrid -- $23,640
Monthly Payment Computation <ul><li>5 years (n=60):  $456.22 </li></ul><ul><li>4 years (n=48):  $549.29 </li></ul><ul><li>...
Internet Sources of Car Information <ul><li>www.consumerreports.org </li></ul><ul><li>www.autosite.com </li></ul><ul><li>w...
Making your purchase <ul><li>Get the best price </li></ul><ul><ul><li>Negotiate with 3 or more dealers </li></ul></ul><ul>...
Making your purchase  (continued) <ul><ul><li>Use Internet or fax dealers yourself </li></ul></ul><ul><ul><ul><li>Do test ...
Making your purchase  (continued) <ul><li>Evaluate financing alternatives </li></ul><ul><ul><li>Avoid until after price of...
Tip:  Smarter Tires?* <ul><li>Tire pressure is one of the most important factors in auto safety and efficient operation </...
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Auto Decision

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Auto Decision

  1. 1. Making Automobile and Housing Decisions: Auto Buying Chapter 5
  2. 2. Replace the junker ...
  3. 3. First major purchase
  4. 4. Needs versus Wants
  5. 5. Fit car into your annual budget <ul><li>Salary $35,220 </li></ul><ul><li>Taxes 10,000 </li></ul><ul><li>Rent 6,500 </li></ul><ul><li>Utilities 3,600 </li></ul><ul><li>Food 3,000 </li></ul><ul><li>Other 1,800 </li></ul><ul><li>Savings 3,520 </li></ul><ul><li>Car payment, insurance, operation 6,800 </li></ul><ul><li>$ 0 </li></ul>
  6. 6. Find maximum price <ul><li>Budgeted amount $6,800 </li></ul><ul><li>Insurance 400 </li></ul><ul><li>Operating costs 1,000 </li></ul><ul><li>Car payments $5,400 </li></ul>
  7. 7. What Can You Afford? <ul><li>Payment: $5,400/12 = $450 </li></ul><ul><li>4 years x 12 mo. = 48 </li></ul><ul><li>6%/12 mo. = .5% </li></ul><ul><li>Calculator </li></ul><ul><ul><li>PMT: -450 </li></ul></ul><ul><ul><li>n: 48 </li></ul></ul><ul><ul><li>i: .5 </li></ul></ul><ul><ul><li>Compute PV </li></ul></ul><ul><ul><li>$19,161 </li></ul></ul>
  8. 8. Choices? 2008 Honda Civic -- $15,210 2008 Honda Element -- $18,750
  9. 9. What Can You Afford? <ul><li>Payment: $5,400/12 = $450 </li></ul><ul><li>6 years x 12 mo. = 72 </li></ul><ul><li>6%/12 mo. = .5% </li></ul><ul><li>Calculator </li></ul><ul><ul><li>PMT: -450 </li></ul></ul><ul><ul><li>n: 72 </li></ul></ul><ul><ul><li>i: .5 </li></ul></ul><ul><ul><li>Compute PV </li></ul></ul><ul><ul><li>$27,152 </li></ul></ul>
  10. 10. Other Choices 2008 Mazda Miata -- $25,030 Chevrolet Malibu Hybrid -- $23,640
  11. 11. Monthly Payment Computation <ul><li>5 years (n=60): $456.22 </li></ul><ul><li>4 years (n=48): $549.29 </li></ul><ul><li>3 years (n=36): $705.07 </li></ul>$22,500 5 years x 12 mo. = 60 8%/12 mo. = .6667% Chevrolet Impala
  12. 12. Internet Sources of Car Information <ul><li>www.consumerreports.org </li></ul><ul><li>www.autosite.com </li></ul><ul><li>www.caranddriver.com </li></ul><ul><li>www.edmund.com </li></ul><ul><li>www.autoconnect.com </li></ul><ul><li>www.autoweb.com </li></ul><ul><li>carpoint.msn.com </li></ul><ul><li>www.kbb.com </li></ul><ul><li>www.nhtsa.dot.gov </li></ul><ul><li>www.intellichoice.com </li></ul>Don’t forget about taxes, insurance, and operation!
  13. 13. Making your purchase <ul><li>Get the best price </li></ul><ul><ul><li>Negotiate with 3 or more dealers </li></ul></ul><ul><ul><ul><li>know the dealer’s cost of the vehicle </li></ul></ul></ul><ul><ul><ul><li>understand the various dealer markups </li></ul></ul></ul><ul><ul><ul><li>be aware of any rebate that may apply </li></ul></ul></ul><ul><ul><li>Use buyer services, e.g., www .samsclub.com , www.costco.com </li></ul></ul>
  14. 14. Making your purchase (continued) <ul><ul><li>Use Internet or fax dealers yourself </li></ul></ul><ul><ul><ul><li>Do test drive at local dealership </li></ul></ul></ul><ul><ul><ul><li>Decide on features and color you want </li></ul></ul></ul><ul><ul><ul><li>On internet shop auto companies’ sites for inventory at different locations; you’ll need to insert zip codes of cities of interest </li></ul></ul></ul><ul><ul><ul><li>Prices differ by location because dealers use different incentives (examples from 2002) </li></ul></ul></ul><ul><ul><ul><ul><li>Ford Explorer costs vary $4,300 nationwide from $32,281 in Tennessee to $27,939 in Oklahoma according to J.D. Power & Assoc. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Lexus RX 300 costs $37,604 in N. California but $35,333 in S. California. </li></ul></ul></ul></ul>
  15. 15. Making your purchase (continued) <ul><li>Evaluate financing alternatives </li></ul><ul><ul><li>Avoid until after price of car is set </li></ul></ul><ul><ul><li>Find the best interest rate </li></ul></ul><ul><ul><li>Consider a lease </li></ul></ul>
  16. 16. Tip: Smarter Tires?* <ul><li>Tire pressure is one of the most important factors in auto safety and efficient operation </li></ul><ul><li>Improves handling, fuel economy, tire life </li></ul><ul><li>Feds considering requiring micro-chip to monitor tire pressure </li></ul><ul><li>Costs $70 per car </li></ul>*WSJ 7/14/04
  17. 17. Questions?
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